The Jolly Green (Energy) Giant?

News and analysis…

XINING, CHINA - NOVEMBER 3: (CHINA OUT) A worker cleans solar panels at a solar photovoltaic power station which is currently under construction on November 3, 2008 in Xining of Qinghai Province, China. (Photo by China Photos/Getty Images) Content © 2010 Getty Images All rights reserved.

In light of President Obama’s remarks concerning clean energy during his 2010 State of the Union address and his meeting with the Republican caucus on Jan. 28th, there has been a flurry of media activity concerned with finding out who leads in producing clean energy technology. The answer? China. While a small fraction of China’s domestic energy production currently comes from alternative energy, the Chinese government is actively encouraging the increase of domestic clean energy use. While the United States should hardly emulate China, it is certainly worth considering what the United State’s largest competitor in the realm of energy consumption is doing in the area of clean technology…

The New York Times | TIANJIN, China — China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world’s largest maker of wind turbines, and is poised to expand even further this year.

China has also leapfrogged the West in the last two years to emerge as the world’s largest manufacturer of solar panels. And the country is pushing equally hard to build nuclear reactors and the most efficient types of coal power plants.

These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.

Tomas Friedman: Dayton Daily News | China’s leaders know their country is in the midst of the biggest migration of people from the countryside to urban centers in history. This is creating a surge in energy demand which China intends to fill with clean, homegrown sources.

In the last year alone, so many new solar panel makers emerged in China that the price of solar power has fallen from roughly 59 cents a kilowatt hour to 16 cents, according to The Times’s bureau chief here, Keith Bradsher.

With so fevered a push for capacity growth, the Chinese government will take it any way they can get it, and if it means creating a new global industry, all the better. Remember, investor certainty is much less an issue in the Chinese context already, where the government makes the rules and the investments. U.S. companies have no certain market for their products – be it energy equipment or green power – and have no incentive to “bet the house” on E.T.

Meanwhile, China last week tested the fastest bullet train in the world — 217 miles per hour. And Bradsher noted that China has nearly finished building a high-speed rail route from Beijing to Shanghai at a cost of $23.5 billion. Trains will cover the 700-mile route in five hours.

By comparison, Amtrak trains require at least 18 hours to travel a similar distance from New York to Chicago.

Clean Techies | Friedman and others may be right that China is doing an exceptional job putting forth a very green face to the world — and, indeed, they are delivering. As Bradsher reports, “China intends for wind, solar and biomass energy to represent 8 percent of its electricity generation capacity by 2020….[t]hat compares with less than 4 percent now in China and the United States.” Bradsher continues, noting correctly, “China’s biggest advantage may be its domestic demand for electricity, rising 15 percent a year.”

In other words, while U.S. lawmakers – and even those in the green movement – continue to jostle over where money should be directed (subsidies for green power purchase, green tech research and development, energy efficiency) and debate whether we can stem the anticipated tide of growth in demand for environmental benefit, the Chinese have one directive: more capacity, now! And, a lot of it, from anywhere. They are not shy (nor ambivalent) about capacity growth. After all, it means economic growth.

Reuters | A new Chinese law requires power grid operators to buy all the electricity produced by renewable energy generators, in a move that will increase the proportion of energy that comes from renewable sources in coal-dependent China.

The amendment to the 2006 renewable energy law was adopted on Saturday by the standing committee of the National People’s Congress, China’s legislature, the Xinhua news agency said.

The amendment also gives authority to the State Council energy department, together with the State Council finance department and the state power authority, to “determine the proportion of renewable energy power generation to the overall generating capacity for a certain period.”

The Washington Post | In the State of the Union Address last Wednesday, President Obama said “the nation that leads the clean energy economy will be the nation that leads the global economy and America must be that nation.” At the same time, on the other coast, 75 clean energy investors, entrepreneurs, and researchers were debating whether the U.S. can gain this leadership position. They agreed that even though Silicon Valley leads the world in technology, it is not clear if it will ever lead in Cleantech. The Valley may develop some breakthrough technologies, but without government help these are unlikely to translate into global leadership. The technology world is rightfully allergic to government assistance and intervention. Cleantech is different, however, and we aren’t dealing with a level global playing field.

The Knowledge Economy Institute Leadership Summit, which I attended, was held at the Joint BioEnergy Institute (JBEI), in Emeryville, California. The question posed: what will it take for the U.S. to achieve global leadership in the clean-energy economy? The group concluded that the U.S., by far, has the strongest innovation platform in the world. But other countries may well reap the benefits of its research efforts. China, in particular, is making massive investments and has a huge advantage from focused policy and large markets. Even though China is not likely to produce its own innovation, it will continue to appropriate U.S. technology and gain a major advantage by combining this with its manufacturing prowess. American firms which are increasingly choosing to build design and manufacturing operations in China will provide it with additional advantage.

DAVOS Dairy | In China, the government poured an estimated $440 billion into clean energy last year. It is investing heavily in renewable energy and nuclear power. It also is pursuing efforts to make extraction of its vast coal reserves cleaner. Already home to one-third of the globe’s solar-energy manufacturing capacity and 400 solar-energy companies, China is expected to surpass Spain this year as the No. 3 country in terms of wind power installations, behind Germany and the United States.

William Rhodes, senior vice chairman of Citigroup and board vice chairman of the National Committee on U.S.-China relations, predicted that Beijing’s research into storing carbon emissions underground could soon lead to a major breakthrough.

In the United States, meanwhile, President Barack Obama faces an uphill battle in Congress to pass politically-sensitive legislation aimed at capping carbon emissions.

“China has the type of centralized industrial policy that we can’t match and don’t want in the United States or the European Union,” said Fred Krupp, president of Environmental Defense, a U.S. advocacy group. “What we have to compete with China is the power of our marketplace. A clear and declining cap on carbon emissions will send the essential market signal to industry, and that will engage our market directly in this competition.”

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